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October 26, 2009

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Investor worry on inflation set to dampen shares

THE Shanghai stock market is not likely to perform strongly this week on investor concerns over inflation.

Last week the benchmark Shanghai Composite Index gained 6.74 percent to close at 3,107.85, its third weekly increase in the month.

The barometer may stay flat after having gained for three weeks and some investors may take profits after it rose above 3,100 last Friday, boosted by positive macroeconomic figures released by National Bureau of Statistics last Thursday.

There will be increasing pressure on the market after it closed above 3,100 (last week) and investor concern over possible inflation will restrain the market from rising too high, Kang Hongtao, an analyst at Guoyuan Securities, wrote in a report.

China's Consumer Price Index dipped 0.8 percent in September from a year ago, the weakest contraction in six months, said the National Bureau of Statistics last Thursday. The pace eased from declines of 1.2 percent in August and 1.8 percent in July.

The country's gross domestic product grew 8.9 percent in the third quarter on an annual basis, the statistics bureau said. The GDP expanded from 7.9 percent in the second quarter and 6.1 percent in the first quarter.

"If China removes the stimulus policies too early, it may cause a setback in the economy," Premier Wen Jiabao said last Friday in Thailand while attending an Association of Southeast Asian Nations summit.

A total of 257 billion non-tradable shares will be unlocked this week. Analysts said the unlocking will not have a big impact on the market as large shareholders are not likely to sell the shares in the short term.


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